As we navigate the ever-changing landscape of Australian property laws and tax regulations, it’s crucial for those of us considering selling property to stay informed and prepared. A recent shift in tax law has introduced a requirement that could leave sellers significantly out of pocket if overlooked. The Australian Taxation Office (ATO) has issued a warning about a ‘common’ mistake that could cost property sellers a staggering $122,000 or more due to a change in clearance certificate requirements.
Brisbane real estate agent Leesa Hackett has observed numerous sellers getting caught by this rule change. She emphasises the importance of not ‘leaving money on the table’ and warns that failing to secure a clearance certificate before settlement could lead to a costly mistake. ‘If they don’t do it, the buyer has to retain 15 per cent [of the sale price] and it goes to the ATO,’ Hackett explained. This means that sellers could be waiting until their next income tax return to reclaim their funds, which could delay their plans, especially if they’re relying on the sale proceeds to finance their next property purchase.
Previously, a clearance certificate, which confirms that the seller is an Australian resident for tax purposes, was only necessary for property sales where the value was $750,000 or more. However, as of January 1, 2025, this threshold has been removed, and now all residents selling property must obtain a clearance certificate from the ATO to avoid a hefty withholding amount from the sale price. The withholding rate has also been raised from 12.5% to 15%.
With the average home in Australia valued at $815,912, a 15 per cent withholding would equate to approximately $122,386. That’s a significant sum that sellers would need to recover from the ATO come tax time. To put this into perspective, imagine the impact on your financial planning and the inconvenience of having to wait months to access funds that are rightfully yours.
The good news is that clearance certificates are free and can be obtained through the ATO’s website. The ATO advises sellers to apply for one as soon as they consider selling their property. These certificates are valid for 12 months, so there’s no need to delay until a contract is signed. ‘Most clearance certificates will issue within a few days, but it is important to apply early because some can take up to 28 days to issue,’ the ATO stated. If you choose not to sell but have a clearance certificate, you are not required to use it.
Unfortunately, some conveyancers may not be fully aware of this rule change, which Hackett describes as a ‘little bit of a mess’. It’s the seller’s responsibility to be informed and ensure they don’t get caught out. The process is straightforward, and considering it’s free, there’s no reason not to secure a clearance certificate well in advance of your property sale.
As the landscape of property sales continues to evolve, it’s essential to stay informed about the latest tax requirements to avoid unnecessary setbacks.
Have you recently sold a property and faced challenges with the new clearance certificate requirement? Or do you have any tips for others navigating this change? We’d love to hear your experiences and insights—feel free to share in the comments below!
Also read: How the ATO’s $11 billion crackdown could affect your finances
You need to clarify that is for an Australian Resident (usually someone from overseas) NOT Australian Citizens. I was of the impression that it related to ALL Australian property until I contacted the ATO to have it clarified.